(All amounts in C$ unless otherwise stated)
Sherwood Copper Corporation (TSX VENTURE:SWC)(TSX VENTURE:SWC.DB) today
announced its results for the three and nine months ended September 30, 2008
including results of operations at its high grade Minto copper-gold mine located
in the Yukon.
Sherwood generated $55.1 million of net revenue and $29.9 million of cash flow
from mining operations(x) during the three months ended September 30, 2008 (the
"Current Quarter") and $116.1 million of net revenue and $68.3 million of cash
flow from mining operations(x) for the nine months ended September 30, 2008 (the
"Current Period"), as detailed below. During the Current Quarter, Sherwood
reported net income of $85.4 million (including $78.2 million in positive
adjustments to unrealized forward sales) and an adjusted net income(x) of $12.1
million (excluding adjustments to unrealized forward sales and other non-cash
adjustments). With the continued dramatic decline in metal prices subsequent to
September 30, as at the date of the Company's Q3 2008 MD&A, the mark-to-market
of Sherwood's copper hedge position was an estimated unrealized derivative
instruments asset of approximately $71.2 million positive, for a net positive
change of $128.8 million over that on September 30, 2008. Copper prices declined
from US$3.98 to US$1.57 per pound between June 30 and the date of this press
release, a fall of over 60%, a fall somewhat mitigated by the fall in the
Canadian dollar over the same time period.
"The results for the third quarter of 2008 reflects a transition period for the
high grade Minto Mine as mill feed came from lower grade stockpiles with lower
recoveries while mining operations focused on accessing the highest grade part
of the Minto deposit, which will provide the mill feed for the rest of 2008 and
all of 2009, and implementing the Phase III mill expansion to 3,200tpd," said
Stephen Quin, President & CEO of Sherwood Copper. "Excellent progress towards
these objectives was achieved subsequent to the quarter end, with high grade ore
(greater than 3% copper) starting to be fed into the mill in mid-October and,
since the end of the first week of November, mill throughput has been averaging
approximately 3,000 tpd (and individual days exceeding 3,400tpd), feed grade
3.7% copper as the ramp up continues and recoveries 95%. The latter part of 2008
and all of 2009 should benefit from these efforts, with high grade mill feed and
higher mill throughput planned for the entire period which, combined with
Sherwood's significant copper hedge book, puts the Minto Mine in an excellent
position to prosper in the current world financial situation."
Copper production during Current Quarter was lower than during the prior two
quarters, at 7.3 million pounds of payable copper, and costs higher at total
cash costs(x) of US$2.10 per pound produced, as mining operations focused on
waste stripping in order to access high grade ore in Q4 2008. As a result, ore
processed came from relatively lower grade stockpiles which had lower than
average recoveries. Year-to-date production for 2008 totals 32.0 million pounds
of payable copper at total cash costs(x) of US$1.37 per pound, with Q4 expected
to be a very strong production quarter due to higher grades and increased
throughput, with costs per pound falling significantly as a result of the
resulting higher copper production, reduced stripping, recently completed
connection to grid electrical power and falling input costs, such as fuel.
Highlights for the three months ended September 30, 2008
- Recorded a net income of $85.4 million and an adjusted net income(x) of $12.1
million.
- Generated cash flow from mining operations(x) of $29.9 million and income from
mining operations(x) of $20.4 million.
- Sold 19,683 dry metric tonnes (dmt) of concentrate with an estimated net
revenue value of $2,798 per dmt at September 30, 2008.
- Produced 8,708 dmt of copper concentrate containing 7.3 million pounds of
payable copper at an estimated total cash cost(x) of US$2.10 per pound of
payable copper as a result of lower production and recoveries during the period.
- Processed 223,245 dmt of 1.78% copper at an average cash cost(x) of $74 per
tonne. This lower grade ore came from ore stock pile as mining activity
concentrated on continued stripping of the high grade Phase 2 higher area with
the removal of 2.7 million dmt of waste. This stripping entered ore in September
and allowed 141,455 dmt of ore to be mined at the end of the period.
- Held 4,421 dmt of concentrate in inventory at September 30, 2008 with a
carrying value of $2,619 per dmt(x) comprised of $1,845 per dmt cash costs and
$774 per dmt non-cash cost.
- Received approval to increase mill throughput to 3,200 tonnes per day under
the Company's Quartz Mining License, an increase of 28% over the previously
approved 2,500 tonnes per day.
- Completed a National Instrument 43-101 compliant Technical Report for the
Minto Mine that details two significant developments:
-- Rescheduling of the open pit where higher grade copper production has been
brought forward from 2010 to 2009.
-- Increased the mineral the resource estimates for the Minto Mine by
approximately 50%, as announced in June 2008.
- Continued to receive significant positive results from the Minto and Kutcho
2008 drill programs.
- Entered into a Letter Agreement with Capstone Mining Corp. to combine, by way
of a plan of arrangement to create a well-funded, low-cost, growth-oriented,
copper company copper with two producing mines in mining friendly jurisdictions
in North America. Sherwood shareholders voted in favour of the combination on
November 14, 2008.
Highlights Subsequent to September 30, 2008
- Entered into a letter of intent November 7, 2008 with Silverstone Resources
Corp. ("Silverstone") and completed the transaction on November 21, 2008 whereby
Silverstone will purchase all of the payable gold and silver from the Minto Mine
over the life of the mine for an up-front payment of US$37.5 million, plus a
further payments of the lesser of (a) US$300 per ounce of gold and US$3.90 per
ounce of silver. The Company will use the upfront payment to strengthen its
balance sheet.
- Shipped 7,865 dmt of concentrate from the Port of Skagway on November 6, 2008.
This will be the last shipment until the first quarter of 2009 due to the Yukon
River freeze-up.
- Made trial connection to the Yukon Energy Corporation grid power on November
15, 2008 for one day and reconnected on November 19, 2008, with full,
uninterruptible power expected by the end of November 2008 thereby significantly
reducing the electrical power costs to the Minto Mine.
Financial and Production Results
The Company recorded net income of $85.4 million and $19.0 million in the three
months (the "Current Quarter") and nine months (the "Current Period") ended
September 30, 2008 respectively.
Net revenue of $55.1 million on the sale of 19,683 dmt ($2,798 per dmt) of
copper concentrate in the Current Quarter generated cash flow from mining
operations(x) of $29.9 million and income from mining operations of $20.4
million. Net revenue of $116.1 million on the sale of 38,690 dmt ($3,000 per
dmt) in the Current Period generated $68.3 million of cash flow from mining
operations(x) and $50.8 million of income from mining operations. Concentrate
sales are summarized in the table below.
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Concentrate Payable Payable Payable
- tonnes Copper Gold Silver
Sales sold (lbs) (oz) (oz)
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Q1-2008 9,158 7,087,088 3,950 25,016
Q2-2008 9,849 7,933,592 4,087 37,304
Q3-2008 19,683 16,989,990 10,108 71,768
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2008 to date 38,690 32,003,964 19,908 134,476
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A total of 8,708 dmt of copper concentrate were produced in the Current Quarter
for a total of 36,416 tonnes produced during the Current Period. There was no
production in the comparable periods as the Company only achieved commercial
production on October 1, 2007. In the Current Quarter, 19,683 dmt were shipped
bringing the total for the Current Period to 38,690 dmt. At the end of the
Current Period 4,421 dmt of copper concentrate with an average attributable cost
of $2,619 per dmt (cash $1,845 and non-cash $774) were held in inventory.
Production costs (cash and non-cash) per dmt of copper concentrate increased
during the Current Quarter to $2,654 in the Current Period compared with $1,333
and $1,373 in the second and first quarters of 2008 respectively as copper
concentrate productions level decreased with the lower feed grade of 1.78%
compared with 3.25% and 3.46% in the second and first quarters and lower
recoveries. Costs per tonne processed were comparable with prior quarters. Mill
feed in the Current Quarter was primarily from lower grade ore stockpile
material while the mine concentrated on stripping the Phase III area of the main
pit to release higher grade ore for processing in the fourth quarter of 2008 and
all of 2009. This lower grade material also had lower recoveries. With access to
significantly higher grade ore in the fourth quarter of 2008 and into 2009, a
return to high recoveries and lower cost grid electrical power, unit production
costs are expected to fall going forward.
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Cost per Cost per Total
Dry metric tonne, tonne, cost per
Copper Concentrate tonne cash(x) non-cash(x) tonne(x)
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Opening inventory 6,692 $1,775 $427 $2,202
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Produced - First Quarter 2008 12,662 $ 985 $388 $1,373
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Sold - First Quarter 2008 (9,158) $1,288 $413 $1,701
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Inventory March 31, 2008 10,196 $1,288 $413 $1,701
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Produced - Second Quarter 2008 15,049 $ 930 $403 $1,333
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Sold - Second Quarter 2008 (9,849) $1,075 $407 $1,482
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Inventory - June 30, 2008 15,396 $1,075 $407 $1,482
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Produced - Third Quarter 2008 8,708 $1,887 $768 $2,654
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Sold - Third Quarter 2008 (19,683) $1,262 $484 $1,746
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Inventory - September 30, 2008 4,421 $1,845 $774 $2,619
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The difference in the metal produced and the metal sold is due to timing
differences between when the material is produced at the mine and when a sale
can be recognized under Sherwood's revenue recognition policy. Under that
policy, in order for a sale to be recognized, the metals have to be sold. Metals
produced but not sold are carried as inventory at the cost of production. This
timing difference is also affected by the availability of road transport from
the mine to the Port of Skagway due to the freeze up and breakup of the Yukon
River in fall and spring of each year.
Current Quarter
The Company reported net income of $85.4 million in the Current Quarter compared
with a net loss of $36.9 million for the three months ended September 30, 2007
(the "Comparative Quarter"). The main reasons for this improvement was the
generation of income from mining operations of $18.6 million and the recording
of $78.2 million in a unrealized gain on derivative instruments compared to a
loss from mining operations of $1.5 million and a loss of $38.1 million on
derivative instruments in the Comparative Quarter; the quarters are not readily
comparable from a mining operation perspective as the Company was in the
development stage in the Comparative Quarter.
Current Period
The Company reported a net income of $19.0 million in the Current Period
compared with a net loss of $59.7 million for the nine months ended September
30, 2007 (the "Comparative Period"). The main reasons for this improvement were
income from mining operations of $45.8 million and an unrealized gain on
derivative instruments of $1.7 million in the Current Period compared with a
loss of $5.2 million from mining operations as the Company was still in the
developments stage and an unrealized loss on derivative instruments of $61.0
million due to higher metal prices in the Current Period.
Sherwood's net income or loss may vary significantly from quarter to quarter
based on revenue recognition timing. In addition, the mark-to-market of forward
metal sales, expenses for stock based compensation and foreign exchange
adjustments, all of which are non-cash adjustments, can swing significantly from
period to period and therefore affect reported net income without any impact on
cash or the financial strength of the Company.
Additional details on the financial and production results are available in the
Company's unaudited consolidated interim financial statements and management
discussion and analysis for the three and nine month periods ended September 30,
2008 filed on SEDAR at www.sedar.com.
Key operating statistics for the Minto Mine in the first, second and third
quarters and year to date for 2008 are presented below:
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Q1 2008(3) Q2 2008(3) Q3 2008 YTD 2008(5)
--------------------------------------------------------------------------
Production
(contained in concentrates)
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- Copper (000's lbs) 10,832,251 13,765,721 7,563,877 32,161,849
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- Gold (oz)(1) 7,085 8,255 6,767 22,107
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- Silver (oz) 59,375 72,511 37,327 169,213
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Mining
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- Waste (tonnes) 1,372,953 3,301,619 2,676,589 7,351,156
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- Ore (tonnes) 321,431 - 141,455 462,885
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- Total material mined (tonnes) 1,694,384 3,301,619 2,818,044 7,814,041
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- Copper grade (%) 3.57 N/A 1.48 2.91
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- Gold grade (g/t)(1) 1.46 N/A 0.63 1.00
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- Silver grade (g/t) 14.6 N/A 4.8 11.5
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Milling
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- Tonnes processed 152,368 206,263 223,245 581,876
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- Tonnes processed per day 1,674 2,267 2,427 2,124
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- Copper grade (%) 3.46 3.25 1.78 2.74
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- Gold grade (g/t)(2) 1.79 1.56 1.18 1.53
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- Silver grade (g/t) 13.9 12.7 6.6 10.7
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Recoveries
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- Copper (%) 93.2 93.2 86.4 91.5
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- Gold (%)(1) 80.8 79.8 79.9 79.9
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- Silver (%) 87.2 86.1 78.8 84.7
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Concentrate
--------------------------------------------------------------------------
- Dry tonnes produced 12,662 15,046 8,708 36,416
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- Copper grade (%) 38.8 41.5 39.4 40.1
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- Gold grade (g/t)(1) 17.4 17.0 15.1 16.9
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- Silver grade (g/t) 146 149 134 144
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Unit Operating Costs(6)
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Cash cost per tonne milled (C$) $86 $68 $74 $75
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Cash cost/payable pound of Cu (US$)
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- Operating costs $1.24 $1.04 $2.14 $1.37
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- By-product credits ($0.55) ($0.53) ($0.43)(4) ($0.52)
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- Treatment, refining, freight,
port, insurance $0.43 $0.37 $0.39 $0.40
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Total cash cost/payable pound
of Cu (US$) $1.12 $0.95 $2.10 $1.25
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(1) Gold is not assayed on site, resulting in a significant lag in
receiving this data.
(2) Gold grades for ore mined are estimated from the reserve block model,
whereas copper and silver grades are based on blast hole assays.
(3) Q1 & Q2/08 numbers have been adjusted based on concentrate settlement
information.
(4) Q3/08 by-product credits for gold and silver are based on estimates
and will be adjusted after final settlement.
(5) YTD totals may not match the totals from individual quarters due to
rounding and post-quarter adjustments.
(6) This is a non-GAAP performance measure; please see Non-GAAP
Performance Measures of this MD&A adjustments.
(x) These are non-GAAP performance measures and readers should refer to notes on
non-GAAP performance measures on page 17 of the Company's management discussion
and analysis for the three and six month periods ended June 30, 2008 as filed on
Sedar for further details.
Concentrate Shipments
19,683 dmt of copper concentrate were shipped in the Current Quarter. The
Company received provisional payments for these concentrates based on the copper
price at time of shipment. The final price is based on the average copper price
in the months October and November of 2008. Due to the substantial reduction in
the copper price over the past few months the Company will have to repay an
estimated US$22.5 million of these provisional payments ($US6.0 million has been
repaid to date). The Company brought forward copper hedge positions to cover
approximately 100% of these metal sales to mitigate the reduced final settlement
pricing by US$13.2 million.
Production Outlook
As a result of delays in accessing the high grade ore following the previously
reported flood event during the Current Quarter, processing of the high grade
ore was delayed into Q4-2008. This delay, resulting in an extended period of
processing lower grade material with lower recoveries, combined with a somewhat
slower the planned ramp up to Phase III production levels, is expected to result
in a reduction in 2008 copper production below that previously forecast.
However, since the high grade ore has now been accessed and mill throughput is
climbing towards Phase 3 capacity, any deferred very high grade production will
be processed in early 2009.
Quality Assurance
The technical information in this news release has been prepared in accordance
with Canadian regulatory requirements set out in National Instrument 43-101 and
reviewed by Stephen P. Quin, P. Geo., President & CEO for Sherwood Copper
Corporation. The operational activities carried out at the Minto Mine have been
carried out under the supervision of Randall Thompson, General Manager of the
Minto Mine, and Kevin Weston, Chief Operating Officer for Sherwood Copper, who
have reviewed and approved the information contained herein. The exploration
activities at the Minto Mine and Kutcho Project have been carried out under the
supervision of Brad Mercer P. Geo., Sherwood's VP Exploration.
Additional Information
Additional information on Sherwood and its Minto Project can be obtained on
Sherwood's website at http://www.sherwoodcopper.com.
On behalf of the board of directors
SHERWOOD COPPER CORPORATION
Stephen P. Quin, President & CEO
This document may contain "forward-looking statements" within the meaning of
Canadian securities legislation and the United States Private Securities
Litigation Reform Act of 1995. These forward-looking statements are made as of
the date of this document and the Company does not intend, and does not assume
any obligation, to update these forward-looking statements.
Forward-looking statements relate to future events or future performance and
reflect management's expectations or beliefs regarding future events and
include, but are not limited to, statements with respect to the estimation of
mineral reserves and mineral resources, conversion of inferred mineral resources
to the measured and indicated categories, the realization of mineral reserve
estimates in mining, the timing and amount of estimated future production, costs
of production, capital expenditures, success of mining operations, environmental
risks, unanticipated reclamation expenses, title disputes or claims and
limitations on insurance coverage. In certain cases, forward-looking statements
can be identified by the use of words such as "plans", "expects" or "does not
expect", "is expected", "budget", "scheduled", "estimates", "forecasts",
"intends", "anticipates" or "does not anticipate", or "believes", or variations
of such words and phrases or statements that certain actions, events or results
"may", "could", "would", "might" or "will be taken", "occur" or "be achieved" or
the negative of these terms or comparable terminology. By their very nature,
forward-looking statements involve known and unknown risks, uncertainties and
other factors, which may cause the actual results, performance or achievements
of the Company to be materially different from any future results, performance
or achievements expressed or implied by the forward-looking statements. Such
factors include, among others, risks related to actual results of current
exploration activities; changes in project parameters as plans continue to be
refined; future prices of metals; future currency exchange rates; conversion of
mineral resources to higher confidence levels or to mineral reserves; possible
variations in mineral reserves, grade or recovery rates; accidents, labour
disputes and other risks of the mining industry; changes in the legal or
regulatory regime affecting the Company's operations; delays in obtaining
governmental approvals or financing or in the completion of development or
construction activities; as well as those factors detailed from time to time in
the Company's interim and annual financial statements and management's
discussion and analysis of those statements, including those for the Current
Period, all of which are filed and available for review on SEDAR at
www.sedar.com. Although the Company has attempted to identify important factors
that could cause actual actions, events or results to differ materially from
those described in forward-looking statements, there may be other factors that
cause actions, events or results not to be as anticipated, estimated or
intended. There can be no assurance that forward-looking statements will prove
to be accurate, as actual results and future events could differ materially from
those anticipated in such statements.
Accordingly, readers should not place undue reliance on forward-looking statements.
Sherwood Copper Com Npv (TSXV:SWC)
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